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To be or not to be – what happens next to the Euro?
| 22-11-2016 | Lionel Pavey |
In the last few weeks, there have been many news articles published, by well-known people, about the state of the union:
End of the Euro?
More than 15 years after its creation, has the Euro run its course? After countries put all their effort into meeting the convergence criteria, did they forget to look at the diverging competitiveness between themselves?
There are numerous political elections and referendums in the next year – Italian constitutional referendum, elections in Austria, France, Germany and the Netherlands. There appears to be a rise in anti-European sentiment expressed by both voters and politicians. After the perceived surprise results in the Brexit referendum and the presidential elections in America, it would be prudent to consider all possible outcomes.
So what would happen if the currency union ceased to exist? We can look back in recent history to the breakup of both the Soviet Union in the 1990’s and the Austro-Hungarian Empire in the 1920’s. A split in the current Eurozone would appear to follow a North-South divide, leading to a revaluation of the currencies in the North and a devaluation in the South. Thanks to modern technology it would be possible to sell bonds of southern countries and move the proceeds to the north almost instantaneously. Despite the huge upheaval – rising inflation and unemployment, declining growth and investment, the situation would eventually normalize as can be seen in the new countries that were previously part of the Soviet Union. But this would all come at a very large price.
Consequences for companies
But what about the consequences for companies? If a contract existed between a Dutch company and an Italian company many questions would need to be answered – which contract law takes preference, in what currency should the contract continue, who bears the risks involved? What happens to a loan extended to a Spanish company by an Austrian bank and denominated in Euros that are no longer legal tender? It would be prudent to look at all the possible risks that a company could face if the Euro were to replaced by national currencies – what cross border contracts do they have, what is the impact to the company’s profit if the new currency devalues, what are the terms and conditions in existing loan documentation regarding covenants, how many new bank accounts would need to be opened to allow trading to continue.
Can the Euro survive? Personally, whilst the idea was good, the reality has been different. It requires a complete “One Europe” – monetary, fiscal, political, defence, law etc. Could this ever be achieved and do the people of Europe really wants this – now that is the question.
Lionel Pavey
Cash Management and Treasury Specialist – Flex Treasurer
Online Treasury training programs: a new trend and options increase
| 21-11-2016 | Annette Gillhart |
A small selection of what we found
Michiel van den Broek is a financial expert and has hands on experience managing foreign exchange and interest risk. The last 10 years, Michiel has focused on training and has set up the Financial Training Hub. He has created custom programs and delivered training to hundreds of participants working for banks, financial supervisors and other financial institutions on subjects such as financial markets, asset & liability management and risk management. Michiel has published an e-book ‘Understand Banks & Financial Markets’ to introduce training participants in the world of finance. He offers training programs such as Financial Markets (Advanced), Banking Basics, Risk Management Basics, Compliance and Financial Markets, Introduction Asset & Liability Management, Bank Management and more. Read more
Free training programs! Coursera is an education platform that partners with top universities and organizations worldwide, to offer courses online for anyone to take. Their mission is to provide universal access to the world’s best education. Statement from their website: ‘Online learning plays a significant role in a lifelong education. In fact, a recent report by the U.S. Department of Education found that “classes with online learning (whether taught completely online or blended) on average produce stronger student learning outcomes than do classes with solely face-to-face instruction.’ Go and check the search term ‘Treasury’. At the moment they offer two trainings: ‘Global Financial Markets and Instruments’ and ‘The Global Financial Crisis’. Read more
Next to other services they offer Treasury training and education in their Treasury Acadamy. The e-learning Treasury Academy enables participants of programs to decide when, where and how they want to follow training courses. Training courses are instantly available through their secured platform. They offer training programs on Foreign Exchange Risk Management, Foreign Exchange Options, Interest Rates and Interest Rates Risk, Modern Bootstrapping, Cash Management and more. Read more
Many more options
It is obvious that this is just a small selection of what can be found. There is more and options increase. If you do not want to follow courses alone you can consider peer assesments or blended learning, too.
Have you followed an online training program lately? Please feel free to share your experience!
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How Bank Independency improves your Treasury Performance
| 18-11-2016 | PowertoPay |
As we emerge from the global credit crisis and banks are starting to (geographically) withdraw from some parts of the market, managing cash flow more effectively is a top priority for treasurers. Monitoring, analysing and reporting on underlying business cash flow and risk has become extremely important. Despite the changing role of the treasurer which resulted in new requirements, treasury must still determine the optimal organizational structure that meets both strategic goals and supports overall efficiency. These efficiency goals have created the need for centralized bank-agnostic solutions that aggregate all financial information onto one platform.
The evolved need for bank-independency
As competition increases in the payments market, banks need to create competitive differentiation, either in-house or in a shared model. Banks need to reshape their focus and keep a consistent client focus. A recent example of a bank that needed to reshape was the withdrawal of RBS from a large number of countries. RBS has made the choice of being a consumer bank for the UK and decided to end servicing the earlier acquired Global Transaction Banking customers.
The withdrawal of RBS from large parts of the market created the need for large corporates to investigate bank-independency and bank-agnostic solutions more thoroughly. A logical consequence, because how can you be certain that your bank will remain active in a specific country for over five years? Frank Nolden, CEO of PowertoPay states: “If the financial crisis has taught us anything, it’s that no matter how big, banks can go bankrupt. Therefore, corporates want to decrease their risk on financial counterparts, because these counterparts might no longer exist in a few years”.
Reducing risk
In order to: 1) reduce the risk on financial counterparts 2) overcome the bottlenecks 3) reduce potential credit inefficiencies found within the use of single banks, corporate treasurers increasingly focus on bank-agnostic solutions. Connecting to multiple banks via a centralized bank-agnostic solution means lowering the risks of having to change and select new banks in the future, which allows corporates to have greater financial performances.
Succeeding with simple connectivity
Large corporates more often choose for developing channels and services that support a multi-banking, bank-agnostic approach. According to the CEO of PowertoPay, Frank Nolden, “the maintenance of all the different multiple technology systems have driven corporates to opt for simple hub connectivity through centralized solutions”. Many corporates have to connect to a myriad of bank portals with numerous security tokens to handle their treasury operations, which considerably increases risk. Bank-agnostic solutions automate, centralize and standardize globally these payment and cash management processes, allowing treasurers to make better, more informed and faster decisions based on real-time holistic insights, improving their performance.
Conclusion
Corporates are always seeking to increase the levels of operational efficiency. Maintaining all types of different multiple technology systems with low efficiency levels have driven treasurers to opt for bank-agnostic, centralized solutions. These solutions reduce the risk on financial counterparts, creating more streamlined and effective treasury operations.